Publicans in England and Ireland are turning their backs on costly satellite TV subscriptions, says Joe Devine.
It remains a popular search on Google or Twitter ahead of any big Premier League or Champions league match: “Pub showing the game?”
But for how much longer?
Michael O’Donovan, owner of The Castle Inn in Cork, has pulled the plug on his Sky Sports subscription. He may be part of a trend.
“The cost of TV sports subscriptions is probably the number one issue our members raise with us on a consistent basis,” says Brian Foley of the Vintners’ Federation of Ireland.
“The costs are increasingly excessive and in a fragmented TV rights market publicans will pay more to maintain the same service.”
The current Premier League season is the first in the latest three-year broadcasting deal.
A total of €9.5bn will be spent on television rights in the UK market alone over the three seasons, €5.9bn from two broadcasters, Sky and BT.
For English football clubs, the 71% increase on the previous deal reduces further reliance on match day income and there’s new hope for a more progressive attitude towards ticket pricing; with a £30 cap already instituted on seats for away fans.
But where there is commercial progress, there is a cost to bear; and that cost tends to eventually find the consumer. Or as we call them in football, the ‘supporter’.
Whilst personal broadcasting subscription costs haven’t increased significantly yet, there is another avenue of sales which has seen more significant increases in recent years: licencing sales to commercial properties.
A UK report on the value of football in pubs, produced by pubfinder app Match Pint and market measurement consultancy CGA Strategy estimates the average charge to pubs and bars showing both Sky and BT sports to be around £20,000 per year.
The report shows that, since the latest TV deal was finalised, Sky and BT upped their prices by 10% and 8.9% respectively (the UK’s current inflation rate is 0.05%).
In the UK, Sky and BT base their fees on the rateable value (RV )of each individual pub, so a larger property in a richer area will have a higher RV than a small property in a rural area.
In Ireland, fees are based on pub turnover, not rateable value as in the UK.
Foley explains: “A pub turning over up to €190,500 per year occupies licence band A, Sky will charge that publican €604 per month for the Ultimate Plus package. EIR Sport is €285 per month on top. At the Races is €34, Racing UK €67 and BoxNation €100.
“The higher the pub turnover, the more it has to pay. If, for instance, the pub is turning over €400,000, then the Sky Ultimate package will cost €978 per month (€11,736 per year).
“It is uneconomical for some pubs to continue paying for subscription services because they don’t get enough customers through the door to justify the investment.
"A small pub generating €150,000 per year will spend over 7% of its turnover on TV packages. Many publicans continue to pay for TV sports packages because they don’t want to lose their customers to a rival pub.”
O’Donovan explained his call to switch off Sky at The Castle Inn.
“When I decided to cancel my Sky Sports subscription I was paying €797 per month plus VAT. I couldn’t justify paying close to €12,000 a year so I decided to look at other options.
“We installed two satellite dishes on the roof of the pub that pick up all the free-to-air channels plus over 1,000 other stations. This is all perfectly legal and cost less than €500.
“Last night we showed darts from Germany and snooker from the UK. We’ll show the Champions League game on RTÉ. It’s true we can’t show the Premier League or European Rugby but I can’t compete with the sports pubs near me anyway so it’s a case of being smart with what we do.”
Although the UK research report suggests that, on average, pubs and bars showing the Premier League increase their wet sales by £34,000 per year, the margins are often tight, and many are struggling to pay the high costs.
The Old Red Lion Theatre Pub; a medium-sized venue with an EC London postcode and a part tie with Punch Taverns, is charged £26,114 (including VAT) per year to show Sky and BT Sport.
With 168 games available during the season, the cost breaks down at £148 per Sky game, and £178.50 per BT Sport game.
The Old Red Lion calculates that to break even, they must sell 88 pints per game.
This could happen several times a year during the bigger clashes, but a standard Saturday lunchtime game is very unlikely to accrue this level of sales.
Additionally, pubs with ties to a pub company (such as Punch Taverns) are forced the buy their beer through that company, often at a much higher cost than the market value, shrinking the net profit on a pint and further squeezing the landlord.
In 2012, the Old Red Lion was paying £1594.81 per month for Sky. The following year, when BT’s successful bid saw them take 38 games a year from Sky, the pub’s Sky bill dropped by just £50 per month, yet they were forced to pay an additional £600 per month to BT, just to maintain the same service to punters.
With the focus of their sales on personal broadband, phone and TV packages, it’s arguable that Sky aren’t particularly interested in reducing the cost to pubs.
Where’s the benefit in giving supporters the option of crowding together to watch their football team, when each individual might command a home package, complete with internet and a landline?
In 1996, Rupert Murdoch admitted that: “Live sport is the battering ram to get pay for TV into people’s homes.” He didn’t mention pubs.
The broadcasters do offer various optional discounts. Selling food, creating an outdoor sports area, and operating a pub in a less densely populated area can qualify businesses for a discount, though bigger discounts come in the form of a partnered distributor.
In Britain pubs can save up to 33% on their total fee by stocking Molson Coors products, although receiving the discount is dependent on hitting a sales quota.
A publican might then find themselves in a position in which the only way they can afford Sky, is by trying to sell products they didn’t want in the first place.
Chris Roach of the White Lion Inn is one such publican; “I receive a discount of £3611 plus VAT, as I have sold my soul to Molson Coors via Carling to guarantee a certain barrage of their products.”
The danger with this sort of discount would become apparent if and when Sky decide to deal with another distributor in future years. Forced to sell a certain amount of the product each month to qualify for the discount, publicans must ensure that their customers are drinking Molson Coors’ products.
If Sky decide to shift distributors for a better deal in a year’s time, those publicans must too make the switch, abandoning the drinks they’ve spent a year encouraging their customers to buy. In a local’s eyes, there’s no crime worse than dispensing with their usual drink.
If the present’s dim, the future’s darker; broadcasters are dealing with a sizeable decline in viewing figures this season. Sky’s early Premier League season ratings were down by a fifth, and BT’s Champions League ratings have dipped by as much as 40% on certain days.
Despite this, last week BT Sport announced an extension of its TV rights for both European competitions to 2021, in a deal worth £1.2bn, 35% more than the company paid last time. If the cost of football to pubs can be unsustainable, then the cost to Sky and BT of rapidly inflating broadcasting deals could quickly follow suit.
Similarly, in the States, ESPN recorded their largest ever subscriber loss in October of last year, with over 600,000 customers cancelling subscriptions.
With Sky paying £11.07m per game, compared to BT’s £7.6m, the company have potentially overpaid for their share.
Twenty years after Murdoch’s comments, live sport remains the battering ram. Were Sky to lose the rights to the Premier League, a sizeable drop in customers might be expected.
Data last year from Hong Kong, when Premier League rights shifted from one broadcaster to another, showed customers tended to follow the football, and the share prices of the broadcaster that lost the rights plummeted.
In fear of a similar fate, Sky could continue to bid, pushing the increasing costs onto the consumer, and in particular, pubs.
The Premier League is shown in 212 territories, in 643 million homes, with a potential audience of 4.7 billion people.
Manchester United recently became the first English club to record annual revenue of over £500m, and Paul Pogba became the world’s most expensive footballer, with a transfer fee of £89m.
The local pub might be struggling with the cost of all that.
Sky and BT declined to comment.
© Irish Examiner Ltd. All rights reserved